Transcript Consolidation in Local Government: A Fresh Look

LGNSW Regional Collaboration and Shared Services Roundtable
March 2015
Graham Sansom
Current context
 Immediate need to address FFTF ‘scale and capacity’
criterion
 Particular challenge for some smaller (in
population) rural-remote councils
 Federal and State grants to councils likely to decline in
real terms:
 Federal deficit and pressure in turn on States
 FAGs freeze means permanent 13% cut, could be
more
 Continuing shortages/high cost of skilled and
experienced personnel
Councils exist in systems of government
 Local government is government:
 Not just service delivery
 Advocacy, planning, community and economic
development, environmental management etc are crucial
 Complexity and changing functions are inevitable
 Organisation frameworks need to adapt
 Inter-government relations are fundamental
 Local leaders must understand state and federal systems
and learn how to manage relationships
 Regions offer a meeting place and platform for collaborative
relations:
 Amongst councils
 With State and federal governments; other stakeholders
Many years and many models
 ‘Core’ NSW models are County Councils and ROCs
 ROCs since 1970s; County Councils long before that
 Variations:
 Alliances promoted strongly post 2004 forced amalgamations
 Wellington-Blayney-Cabonne (shared services focus)
 Lower Macquarie Water Utilities (special purpose)
 ‘Overlays’:
 Various State regional/strategic planning committees
 Regional development bodies – State and federal
 Tourism boards/associations; regional libraries etc
 Multiple models often co-exist in one region
 But overall, lack of a consistent, concerted approach to
regional collaboration (often ‘stop-start’ initiatives)
County Councils
 Long history across a range of joint activities:
 Electricity, planning (Cumberland), flooding, weeds etc
 Now only 14
 5 water (one also sewerage0, 8 weeds, 1 floodplain
management
 ‘Councils’ under LG Act (exempt from some provisions);
formed by Minister (but councils can initiate); separate
proclamation for each
 Member councils elect delegates, but then County
operates largely independently
 Lack of formal governance/decision-making links
Other relevant examples
 NZ Council Controlled Organisations
 Voluntary but formal company structure with separate board;
annual operating agreements with shareholder councils
 Victoria Regional Management Forums
 8 regions; State agency heads plus council CEOs, other
stakeholders; wide brief to promote collaboration; no Act or
dedicated
 Queensland Regional Roads and Transport Groups
 State department-LGAQ agreement; network planning;
allocate State funding for regional roads
Expected benefits
 Regional collaboration/shared services typically undertaken
to achieve one or more of:
 Economies of scale – combining requirements for resources,
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products and services
Economies of scope – working together achieve a critical mass
in order to provide a wide range of services
Improved service quality – through greater expertise, improved
access and specialisation
Organisational development – sharing of staff skills and
expertise
Increased strategic capacity – a higher level of capability to
plan and act more strategically and effectively
Stronger regional advocacy – strategic plans, policy issues
Increased funding support – for major services/infrastructure
or regional ‘special projects’
Reviewing the evidence
 What works and why – or why not?
 Do regional collaboration and shared services offer a viable
alternative to amalgamations?
 What are the pre-conditions for success?
 What are the concerns and risks that have to be addressed?
Gooding Davies report on ROCs (2012)
 “….[ROCs] are the primary form of multi‐purpose shared
services provision by local government…
 Nevertheless, the delivery of shared services by ROCs
remains patchy and uneven. This reflects the disparate size,
number and wealth of participating councils, as well as
variations in factors such as the level of commitment and
institutional leadership involved. These factors apply to all
forms of shared services activity…
 “… the key factor was a fear that by greatly expanding their
role ROCs could become or be perceived as either a ‘fourth
tier’ of government or even a replacement for their member
councils.”
Shared services (Dollery et al)
 “…given that scale and scope economies do exist in some specific local
government services… the best way to achieve larger scale economies in
these selected functional areas is for councils to enter into collaborative
shared services agreements…” (2012)
 [But] “… it is important not to ‘oversell’ this message by way of
exaggerated claims for what shared services models can realistically
achieve … shared services models have their limitations which must be
recognised.” (ibid)
 [And] “… there are often significant barriers to the implementation of
shared service arrangements, which are difficult to overcome, including
the loss of ‘local identity’, the complexity of the processes involved,
conflicting objectives between participating councils and uncertainty
surrounding potential benefits.” (2011)
 NB: Failure of New England Strategic Alliance
Critical dimensions (Somerville and Gibbs 2012)
 Organisational culture - shared services development
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requires strategic thinking, a careful approach to risk
taking
Leadership - building trust amongst the partners, a clear
vision and a commitment to communication.
Flexibility - to move away to a provider/producer split
between the council and the shared service entity.
Existing relationships - building a foundation for the
development of shared services
Strong change management process - to overcome any
institutional obstacles.
‘Joint Board’ model (Dollery and Johnson 2007)
 Draft paper prepared by Shires Association
 Idea that two or more councils would fully share their
administration, overseen by a Joint Board of councillors
 Findings:
 “… constituent councils would each retain their current
political independence, thus preserving extant local
democracy, while simultaneously merging their
administrative staff and resources into a single enlarged
bureau, in an attempt to reap any scale economies, scope
economies, or other benefits that may derive from a larger
aggregated administration.”
 Could achieve savings of 10% or more
ACELG ‘Consolidation: A Fresh Look’
Amalgamation
Shared Services
Regional
Collaboration
Efficiency and
Economies of
Scale
Strong link
Strong link
Strategic
Capacity
Strong link
Medium-strong link
Weak link
subject to governance
Service
Improvement
and Innovation
Strong link
Strong link for
services that are
effectively shared
Depends on nature
and scope of
collaboration
Potential
Diminution of
Local
Democracy
Distinct risk, but
can be managed
Risk where decisionmaking is ceded to
joint agency
Little or no risk
Weak link
ILGRP ToR and objectives
 Options for governance models, structural arrangements
and boundary changes:
 To improve the strength and effectiveness of local
government
 To drive key strategic directions in ‘Destination 2036’
and the NSW 2021 State Plan
 Goal:
 A more sustainable system of democratic local
government that has added capacity to address the
needs of local and regional communities, and to be a
valued partner of State and Federal Governments
 Focus on building ‘strategic capacity’
‘Strategic Capacity’
… coping with complexity, uncertainty and change
Relevance
Resources
Credibility
• Places and
communities
• Valued
partner in
government
• Role in wider
agendas
• Innovation
and creativity
• Finance/asset
management
• Rates revenue
• Skills (inc
strategy,
policy, IGR)
• New ways of
working
• Productivity
• Improved
political
governance
• Role of mayors
• Comparative
benchmarking
• Leadership by
larger councils
Logic of Joint Organisations
 Part of a package to enhance strategic capacity
 Offer an alternative to amalgamations (provided obstacles to
robust shared services can be overcome)
 Offer support to small rural-remote councils
 Flexible model tailored to different needs
 Decisive move away from ‘one-size-fits-all
 Build and improve on established practice
 NSW ROCs, County Councils, alliances
 Related models inter-state and overseas
 A vehicle for effective collaboration with State agencies
 Local government would have ‘critical mass’ and clout
 Mergers and Council of Mayors (SEQ model) preferred for metro
Sydney – sheer number of councils is a fundamental issue
Defining regions
 Not a ‘deal-breaker’ provided structures are flexible:
 There can be sub-regional clusters and different ‘interest groups’
with a wider region (eg WBC in the Central West)
 One region can have a service agreement with another (eg water
utilities)
 ILGRP achieved broad agreement amongst key agencies, but
momentum seems to have been lost
 Key factors for ILGRP:
 Building on current arrangements, especially ROCs
 Alignment with State and federal agencies for strategic planning,
program coordination
 Viability of a regional alliance of water utilities (at least 10,000
connections)
 A regional centre with capacity to ‘anchor’ the JO and to assist
smaller member councils where required.
Proposed Non-Metro Regions
Proposed Metro Sub- Regions
Proposed governance framework
 New provisions in LG Act to replace County Councils
 Mandatory active membership by councils in region
 Separate negotiated proclamation for each JO to establish
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governance/financial arrangements, plus agreed functions
Governing body of mayors, but proclamation could allow
additional council representatives and observers/advisers
(including from outside member councils)
JOs can establish subsidiaries with skills-based boards
Subsidiaries have annual operating agreement with JO
governing body
AGMs open to all councillors and to the public for
accountability and discussion of future activities
Proposed core functions
 Strategic regional and sub-regional planning
 Integration with State regional coordination system
 Regional advocacy and inter-governmental relations
 Collaboration on key infrastructure (water utilities, road
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network planning, major projects)
Regional economic development a nd environmental
management
Library services
‘High level’ corporate services (including procurement)
Other shared services as agreed (but expected to be
substantial)
Suggested Structure for Joint Organisation
SA Local Excellence Panel proposal
Conclusion
 Local government faces an uncertain future in difficult times
 It needs greater capacity and credibility as government
 Reform must be multi-dimensional:
 A mix of mergers, shared services and other forms of regional
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collaboration – there is no single ‘right’ approach
Objectives vary and any approach may ‘succeed’ or ‘fail’
depending on the circumstances
Regional collaboration is tricky – especially building trust
Purely voluntary (opt-in/opt-out) regional collaboration doesn’t
deliver solid, long-term gains
Mandatory or durable, far-reaching shared services is in many
ways little different from mergers
 We need to review past experience, look at a range of current
arrangements, and develop new models if necessary